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- Bitcoin incorporates features intended to maintain a stable store of value in the cryptocurrency.
- Ethereum, on the other hand, was designed around a different set of principles and use cases.
- Bitcoin and Ethereum have different networks aligned to their primary objective.
Bitcoin (BTC) and Ethereum (ETC) are two of the most widely recognized, traded and used cryptocurrencies in the world. Bitcoin is one of the oldest cryptocurrencies introduced by Satoshi Nakamoto to the market way back in 2009, at an initial price of less than a cent. Today, after 11 years, Bitcoin has risen in value to over US$50,000.
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Compared to Bitcoin, Ethereum is a newer cryptocurrency, recently debuted in 2015 and in the span of six years increased from a mere US$3 to well over US$2000. The rapid growth of these two digital assets has drawn investors looking to cash in on the trend.
New investors, however, may be led to believe that Bitcoin and Ethereum are the same or all other cryptocurrencies, for that matter. This belief would be encouraged because both are essentially cryptocurrency coins; however, nothing could be further from the truth.
Bitcoin helps store value
Bitcoin, the bellwether of the crypto world, was designed as a digital currency in an attempt to replace traditional fiat currency. It also incorporates features intended to maintain a stable store of value in the cryptocurrency, which is an essential aspect of a fiat currency. As well as being a decentralized currency free from government control, there is a limited supply of Bitcoin (up to 21 million) in the market, ensuring that its value never becomes inflationary, unlike the case of a fiat currency which could be printed at will by the central banks.
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These features help make bitcoin very similar to gold, because of which it has become a favourite of investors looking for an alternative to gold for long-term investments.
Ethereum helps innovate financial technologies
Ethereum, on the other hand, was designed around a different set of principles and use cases. Ethereum is essentially a decentralized network designed for the end-level user. One of the key differentiating features of the Ethereum network is the ability to create decentralized applications by users through which smart contracts can be arranged.
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These features have opened up a new world of possibilities in finance called decentralized finance or DeFi, which aims to put total control of digital currencies in the users’ hands.
To understand the difference in simpler terms, a statement by Alex Adelman, CEO of Lolli, could be a perfect example. He has compared Bitcoin to Gold as Bitcoin is capable of storing value for the future. Talking about Ethereum, he compared it with electricity because, like electricity, it facilitates other innovative technologies.
Bitcoin and Ethereum have different networks aligned to their primary objective. While bitcoin was invented as an alternative currency to national fiat currencies and thus aspires to be a medium of exchange and a store of value, Ethereum, on the other hand, was created as a platform to facilitate immutable, programmatic contracts and applications via its own currency.
So, an investor looking for a long-term investment that could beat inflation just as gold could look at Bitcoin. On the other hand, Ethereum is more suitable for investors looking for a market with a high potential for rewards on the back of potential innovative technologies in the world of finance.